Drug companies steer toward automakers for advice

Tomorrow's big pharmaceutical companies could very well look a lot like today's automakers. That seems like an odd thought, doesn't it?

Most major auto firms and others outsource most of what they do now. Many are now essentially idea, design and marketing companies, and they assemble automobiles with parts made by subcontractors. Drug firms of the (near) future could theoretically do the same thing and redirect their resources toward research and development and marketing and outsource everything else.

It's not far-fetched. As Reuters notes in a recent piece, GlaxoSmithKline ($GSK) and AstraZeneca ($AZN) are already turning to the automobile industry for advice. GSK met earlier this fall with McClaren's Formula One engineers to tap into their know-how concerning innovation and process, and the company worked with French automaker Renault back in 2007. AstraZeneca two years ago met with manufacturing experts from Jaguar Land Rover (now owned by Tata Motors in India). More are likely to follow.

Streamlined automakers offer a clear parallel here for the drug industry, in part because Big Pharma is trying to cut costs by outsourcing--like auto companies have. It has to, as it faces everything from tougher regulations to expiring patents, cuts in healthcare spending and diminished returns from its research. Many are already laying off employees and acquiring small start-ups that advanced a drug up to a certain point on their own.

Drug companies could also learn a thing or two from automakers about speed to market. A drug can take 10 or more years to advance from the preclinical stage to market. And on the product development side, autos win out. Porsche says the auto industry has slashed its product development time by 28% but that pharmaceutical product development timeline now drags on 31% longer than it used to, according to the Reuters article. (Porsche has a consulting arm that is starting to market to pharma companies.)

Reto Hess, an analyst at Credit Suisse Private Banking, told Reuters that the auto industry could be a model for other industries, at least in terms of production costs. He downplayed their impact in other areas, pointing out that at least in Europe, auto companies "have not always been able to recoup the costs of capital." And as we all know, in the face of the economic meltdown that nearly cratered the U.S. auto industry, car makers here haven't exactly excelled in that area, either.